IRS pushes back major W-4 changes until 2020

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The Treasury Department said Thursday the Internal Revenue Service would push back implementation of a redesigned Form W-4 to tax year 2020, allowing the agency to keep working on a new approach to the employee withholding form.

The IRS released a draft version of a new Form W-4, "Employee’s Withholding Allowance Certificate," earlier this year in the wake of the Tax Cuts and Jobs Act, but it received heavy criticism from groups like the American Institute of CPAs and the National Association of Enrolled Agents, which said it raised privacy concerns, created a substantial risk of underwithholding, and would require taxpayers to forecast a number of tax-related items that are traditionally difficult to predict (see AICPA wants IRS and Treasury to simplify Form W-4 and NAEA sees lots of problems with new Form W-4).

After enactment of the Tax Cuts and Jobs Act last December, the Treasury and the IRS began making extensive changes to the wage withholding system and Form W-4, "Employee’s Withholding Allowance Certificate." The new tax law eliminates personal exemptions, doubles the standard deduction and changes tax brackets, among other extensive revisions to the Tax Code. In June, the IRS released a draft version of a redesigned form for public comment and received many suggestions for improvements, which the agency is working to incorporate in the form to be released for tax year 2020.

“The Treasury and IRS are working diligently to implement the most comprehensive tax legislation in more than 30 years,” said Treasury Secretary Steven Mnuchin in a statement. “Launching the redesigned form in 2020 will allow the Treasury and the IRS to properly implement changes to the withholding system and ensure taxpayers have a positive and simplified experience.”

For tax year 2019, the IRS will instead release an update to the Form W-4 that’s similar to the 2018 version currently in use. That 2019 form will be released in the coming weeks according to the usual practice for annual updates.

The Treasury and IRS plan to continue working closely with the tax and payroll community as they make further changes to the Form W-4 for 2020 in hopes the upcoming revisions will make the withholding system more accurate and transparent to employees. The IRS intends to release the 2020 form and the relevant guidance and information early enough in 2019 to give employers and payroll processors sufficient time to update their systems.

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Tax forms Tax reform Payroll taxes IRS Treasury Department